Montana Oil and Natural Gas Production Tax — Guidance

# preamble

Oil and Natural Gas Production Tax

Overview

Oil and Natural Gas producers must file an Oil and Natural Gas Production Tax Return.

Oil and Natural Gas returns are available in our TransAction Portal (TAP) .

Natural Gas Production Tax

Effective 7/1/23, with the passage of Senate Bill 426, the definition of Natural Gas has been expanded to include all forms of inert gas, including helium.

Montana taxes natural gas by percentage of gross value per cubic foot of natural gas produced and sold.

Natural Gas: Gross Value Formula

Gross Value Formula:

Gross Value = (Total Cubic Feet - Production Used in Operation) x Average Wellhead Value

The gross value is the total cubic feet produced each month multiplied by the average wellhead value per cubic foot.

You may deduct any natural gas used in operating the well.

Natural Gas Tax Rates

Natural Gas Production Tax Rates (effective Jan 1, 2024)

Production Category

Qualifier

Working Interest

Nonworking Interest

Reporting Schedule

Primary Recovery Production

First 12 months of production

0.80%

15.10%

# NG-INCENTIVE

Primary Recovery Production

Pre-1999 wells after incentive period

15.10%

15.10%

NG-PRE99

Primary Recovery Production

Post-1999 wells after incentive period

9.30%

15.10%

NG-POST99

Stripper Wells Averaging < 60 MCF per Day

Pre-1999 wells

11.30%

15.10%

NG-PRE99

Horizontally Completed Well Production

First 18 months of qualifying production

0.80%

15.10%

# NG-INCENTIVE

Oil Production Tax

Montana taxes oil production by percentage of gross value per barrel produced and sold.

Oil: Gross Value Formula

Gross Value Formula:

Gross Value = (Total Barrels - Barrels Used in Operation) x Average Wellhead Value

The gross value is the total barrels produced each month multiplied by the average wellhead value per barrel.

You may deduct any oil used in operating the well.

Oil Production Tax Rates

Oil Production Tax Rates (effective Jan 1, 2024)

Production Category

Qualifier

Working Interest

Nonworking Interest

Reporting Schedule

Primary Recovery Production

First 12 months of production

0.80%

15.10%

O-INCENTIVE

Primary Recovery Production

Pre-1999 wells after incentive period

12.80%

15.10%

O-REG

Primary Recovery Production

Post-1999 wells after incentive period

9.30%

15.10%

O-REG

Stripper Wells (Averaging <10 barrels per day for pre-99 wells or averaging <15 barrels per day for post-99 wells)

Pre-1999 stripper oil

9.30%

15.10%

O-STRIP Pre-99

Stripper Wells (Averaging <10 barrels per day for pre-99 wells or averaging <15 barrels per day for post-99 wells)

Post-1999: First 10 barrels of stripper oil Average quarterly sales price reported for all Montana Oil < $30 per barrel

5.30%

15.10%

O-STRIP Post-99

Stripper Wells (Averaging <10 barrels per day for pre-99 wells or averaging <15 barrels per day for post-99 wells)

Post-1999: Over 10 barrels of stripper oil Average quarterly sales price reported for all Montana oil < $30 per barrel

9.30%

15.10%

O-STRIP Post-99

Stripper Well Exemption or Bonus (Averaging ≤ 3 barrels per day)

Pre-1999 Stripper Well Exemption Average quarterly sales price reported for all Montana oil < $54 per barrel

0.80%

15.10%

OSTR-X3

Stripper Well Exemption or Bonus (Averaging ≤ 3 barrels per day)

Post-1999 Stripper Well Exemption Average quarterly sales price reported for all Montana oil < $54 per barrel

0.80%

15.10%

OSTR-X3

Stripper Well Exemption or Bonus (Averaging ≤ 3 barrels per day)

Pre-1999 Stripper Well Bonus Average quarterly sales price reported for all Montana oil ≥ $54 per barrel

5.30%

15.10%

OSTR-X3

Stripper Well Exemption or Bonus (Averaging ≤ 3 barrels per day)

Post-1999 Stripper Well Bonus Average quarterly sales price reported for all Montana oil ≥ $54 per barrel

5.30%

15.10%

OSTR-X3

Horizontally Drilled

Post-1999 wells first 18 months

0.80%

15.10%

O-INCENTIVE

Incremental Production

New or expanded secondary recovery production

8.80%

15.10%

ENH-INCR Incremental Production

New or expanded tertiary production

6.10%

15.10%

# ENH-INCR

Horizontally Recompleted Well

Post-1999 wells first 18 months (on incremental production)

0.80%

15.10%

# ENH-INCR

Production Incentives

Please see the First Quarter 2026 Incentive Letter for more information about the current oil incentives.

Stripper Oil (Starting January 1, 2022)

Pre-99 Stripper Well

A Pre-99 stripper well is an oil well drilled before January 1, 1999 that produced more than 3 barrels per day but fewer than 10 barrels per day in the prior calendar year.

There is no price restriction on a Pre-99 stripper well.

Post-99 Stripper Well

A Post-99 stripper well is an oil well drilled on or after January 1, 1999 that produced more than 3 barrels a day but fewer than 15 barrels a day in the prior calendar year if the average quarterly sales price reported by a producer for all MT oil is less than $30 a barrel.

If the price of oil is equal to or greater than $30 a barrel in a quarter, there is no stripper tax rate for post-99 wells in that quarter.

Stripper Well Exemption and Bonus

How Stripper Well Exemption or Bonus is Determined

The average quarterly sales price reported by the producer for all Montana oil determines whether the stripper well exemption or the stripper well bonus is available to that producer for that quarter.

Starting January 1, 2022, on the OSTR-X3 schedule, there are separate Working Interest columns for pre-99 and post-99 wells under both the stripper well exemption and the stripper well bonus.

Stripper Well Exemption

If a producer's average quarterly sales price is less than $54, then the stripper well exemption is available for that quarter.

Stripper Well Bonus

If a producer's average quarterly sales price equals or is greater than $54, then the stripper well bonus is available for that quarter.

Incremental Production

New/Expanded Tertiary Production (approved March 23, 2017 - February 18, 2019)

For new or expanded tertiary production (working interest taxed at 6.10%) approved by the board of oil and gas conservation between March 23, 2017 and February 18, 2019, the average price for a barrel of west Texas intermediate crude oil must be less than $54 a barrel in order for the incentive for incremental oil production to be available for that quarter.

The average price for the quarter ending March 31, 2026 is $72.7351 .

Since the average price is not less than $54, this incentive is not available for this quarter.

View First Quarter 2026 West Texas Intermediate Prices .

New/Expanded Tertiary Production (approved on or after February 19, 2019)

New or expanded tertiary production (working interest taxed at 6.10%) approved by the board of oil and gas conservation on or after February 19, 2019 is not subject to any price trigger.

Exempt Royalties

The following royalties are tax-exempt:

Tribal royalties from on-reservation oil production leased under the Indian Mineral Leasing Act of 1938.

All government royalties, including:

Office of Natural Resources Revenue (ONRR)

State of Montana

County and municipal governments

Reporting and Payment Options

File and pay through our TransAction Portal (TAP) or

Make an ACH Credit Payment

Due Dates

Returns are due 60 days after the end of the calendar quarter:

First Quarter: May 30

Second Quarter: August 29

Third Quarter: November 29

Fourth Quarter: March 1

# Penalties and Interest

The Oil and Natural Gas Production Tax is subject to uniform penalties and interest .

Revenue Distribution

We collect Oil and Natural Gas taxes and distribute the revenue between the state and counties. Each county receives a percentage of revenue as shown in 15-36-331, MCA .

Remaining Revenue Distribution

The remaining revenue is divided:

2.16% to the natural resources project state special revenue account ( 15-38-302, MCA )

2.02% to the natural resources operations state special revenue account ( 15-38-301, MCA )

2.95% to the orphan share account ( 75-10-743, MCA )

2.65% to a state special revenue fund for the Montana University system ( 15-10-109, MCA )

Remaining proceeds go to the state general fund

Related Laws

15-36-303, MCA

ARM 42.25.1801